COMMISSIONER OF INCOME TAX Vs. AVERY INDIA LTD

JUDGEMENT

(1.) In this reference, the following question has been referred to us by the Tribunal under Section 256(1) of the Income-tax Act, 1961 :

(2.) The matter relates to the assessment of the assessee for the assessment year 1982-83 for which the previous year ended on December 31, 1981.

(3.) Shortly stated the facts are that the assessee-company derives income from manufacture and sale of weighing and testing machines, weights, etc. The Assessing Officer held that the payment of Rs. 13,28,450 was of capital nature since as per the terms of the agreement relating to the use of trademarks and patents and copyrights of the Revere Corporation, the assessee-company had full right to use them in India not only until the existence of the said agreement but also after the expiry or termination of the agreement. The disallowance made by the Assessing Officer was upheld by the Commissioner of Income-tax (Appeals). On the assessee's appeal, the Tribunal held that the payment under the agreement with the said foreign company of the amount of Rs. 13,28,500 was revenue expenditure and deductible as such. The Tribunal set forth its reasons for the conclusion as under :